Bahrain Central Bank Issues Comprehensive Stablecoin Regulations

The Central Bank of Bahrain (CBB) has taken a significant step forward in the regulation of stablecoins by issuing a comprehensive stablecoin regulation on July 2nd, 2025. This move follows a consultation paper released in October 2024, which sought industry input on the matter. The new regulations allow for the issuance of fiat-backed stablecoins in various currencies, including the Bahraini Dinar, United States Dollars, and other fiat currencies acceptable to the CBB. The CBB is now offering licenses to stablecoin issuers and custodians, marking a pivotal moment in the region's approach to digital assets.

The CBB has emphasized the immediate effectiveness of the new module, which includes detailed guidelines and requirements for stablecoin issuers. This module, part of CBB Rulebook Volume 6, outlines the standards that issuers must meet to control the total supply, mint and burn stablecoins, and manage reserve assets. The regulations also stipulate that current licensed entities wishing to offer regulated stablecoin services must seek written approval from the CBB, providing a detailed description of the new services, required resources, and operational framework.

One of the most notable aspects of the new regulations is the allowance for yield-bearing stablecoins. These stablecoins can offer passive returns to clients from interest or rewards earned from the investment of reserve assets. However, the CBB has set stringent requirements to ensure that the yield rate or reward rate is reasonable and does not adversely affect the stability of the stablecoin or the financial health of the issuer. This move is aimed at promoting financial stability while encouraging innovation in the digital asset space.

The CBB has also outlined stringent requirements for stablecoin issuers, including the need for a three-year track record in issuing stablecoins or working in the crypto asset domain. The license fee for stablecoin issuers is variable, set at 0.25% of their relevant operating expenses, with a minimum fee of BD 5000 and a maximum fee of BD 12,000. Additionally, the CBB places a strong emphasis on governance and compliance, requiring stablecoin issuers to have adequate systems and controls to prevent, detect, and combat money laundering and terror financing.

The new regulations also specify the composition of reserve assets, which can only include cash and deposits with banks rated at a minimum of AA- or equivalent, debt securities with the central bank, or repurchase agreements backed by short-term government money market funds. This ensures that the reserve assets are of high quality and liquidity, reducing credit and concentration risks. The CBB also reserves the right to reject an application for the issuance of a stablecoin if it determines that the issuance might cause damage to the national economy, the holders of the stablecoin, or public investors in general.

In comparison to the stablecoin regulations set by the UAE Central Bank, the CBB's regulations are more comprehensive and forward-thinking. While the UAE only allowed AED stablecoins to be considered as methods of payment within the country, the CBB has allowed both Bahraini Dinar and USD stablecoins, as well as Sharia-compliant ones. Furthermore, the CBB's allowance for yield-bearing stablecoins is a significant departure from the UAE's regulations, which did not mention this aspect. This move by the CBB is expected to attract more crypto brands to the region, helping them break through and dominate headlines fast.